Global real estate recovery underway but market is still fragile and patchy, report warns

Residential property prices across the globe are starting to recover from the downturn and even in countries where there were sharp falls at the beginning of the year the decline is slowing.

The latest Global House Price Index from international property consultants Knight Frank shows that there are the first tentative signs of recovery in 33 key locations that were examined for the report.

‘It now appears that house prices are starting to stabilise across the world.

The latest results from our Global House Price Index show values increased in almost half of the locations reporting price changes for the second quarter of the year,’ explained Liam Bailey, head of residential research at Knight Frank.

‘Significantly, quarterly price falls accelerated in only 22% of the locations and did not exceed 10% in any country. This compares with double-digit falls in a number of locations during the first quarter,’ he added.

Israel was the top performer on an annual basis with prices rising 12.5% while Dubai was worst with prices falling 47%, but slowing in the second quarter of the year to a more manageable 7.5%.

A number of other countries also saw strong quarterly gains with prices in Norway increasing by 5.3%, Sweden up 3.6% and Finland up 3.9%. ‘Northern Scandinavia in general seems to be recovering well.

This is probably because prices didn’t increase to the same extent as other areas during the property boom.

There has also been a sharp slow down in the number of houses under construction.

In Sweden, construction started on 45% fewer houses in the first half of 2009 compared with the same period last year.

In Norway, new starts have fallen to their lowest levels since 2000,’ said Bailey.

An imbalance between supply and pent-up demand also helped the UK’s housing market, which increased by 1.1% in the second quarter. Even the US, where the sub-prime mortgage crisis started, is starting to see a recovery.

Prices increased 1.3% in the second quarter following falls of 7% in each of the previous two quarters, the report also shows.
Even in Dubai the recovery looks underway.

‘Prices are still falling in Dubai, but the decline has slowed sharply.

The second-quarter drop in Dubai was only 7.5% compared with a massive 41% slide during the previous three months,’ explained Bailey.

‘While the market still remains over supplied, transaction volumes have started to increase on the back of reduced asking prices, the increased availability of credit and more certainty from developers regarding the completion dates of projects,’ he added.

The report concludes that overall, it seems that prices are starting to bottom out around the world.

However, the market is still fragile and patchy. Prices in Bulgaria, for example, fell by 9.7% in the second quarter of 2009; only a slight improvement on the country’s first-quarter fall of 12.4%. In Thailand, values fell by 5.6% after an increase of 2.7% in the first quarter.

‘One quarter of recovery is no guarantee prices will continue to increase. It is also worth noting a number of countries, such as Estonia, that recorded large price falls at the beginning of the year have not yet reported their second quarter results so the global picture is not fully complete,’ Bailey said.